Monday, February 16, 2009

People seem to be concerned that Lloyds, despite making a massive loss and being on the verge of nationalization, wants to pay bonuses to lower-paid staff.

Immediately this raises the question of why fairly ordinary staff are being paid bonuses for merely "hitting their targets". After all, if bonuses are meant to prevent high-fliers from leaving the organization, in what sense are rank-and-file employees also high-fliers?

Two answers suggest themselves to my cynical mind :

One is that perhaps the banks pay ordinary workers low salaries and then top them up with bonuses as a kind of tax dodge. In which case, this is simply a loophole that needs closing. The workers should lose their bonuses, get pissed off and demand higher salaries next year, which get taxed at normal rates.

But this is pure speculation. Perhaps taxes are paid normally on these bonuses. In which case, something more interesting is going on.

Perhaps the bonus-qua-bribe-not-to-fuck-up-the-company culture goes deep in the organization, and basically nobody can be trusted to do their job properly unless they feel they are getting a special treat for it.

Maybe the whole financial industry is effectively shipwrecked on "punished by rewards" where all the incentive and bonus schemes are not simply bad because they encourage people to take risks, but bad because everyone starts to feel that they're being treated unfairly unless they get some kind of bonus and the organization becomes incapable of functioning without.

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